Hire purchase
Buying an asset through an initial payment followed by instalments, where the buyer becomes the owner once the final instalment is paid.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- AmortisationThe repayment of borrowed capital over a fixed term through equal instalments, each of which is split between interest and principal in proportions that shift over the life of the loan.
- Credit scoreThe number a credit information company builds from your loan and credit-card repayment history, and the first thing a lender looks at when your application arrives.
- Debt to income ratioMonthly debt servicing commitment divided by monthly income — the ratio that says whether a household's income can carry the loans it already has, let alone another one.
- Debt trapThe state a borrower reaches once debt is being used to meet ordinary living expenses, so fresh borrowing becomes necessary to service the borrowing already outstanding.
- HypothecationA charge over demat securities where the lender needs the borrower's concurrence to appropriate them — the same book entries as a pledge, with one extra confirmation, and a term used only in NSDL.
- PledgeA charge created over demat securities in favour of a lender who may appropriate them unilaterally on default — created by book entry under section 12 of the Depositories Act, not by handing over anything.
Where this is taught
Free preparation for NISM Series X-A← All terms